This is Illegal — San Antonio’s Freetail Brewing Company

February 17, 2016

One afternoon in late 2011, a letter arrived at Freetail Brewing Company’s brewpub location in San Antonio. Printed on expensive card stock, emblazoned with the insignia of an Oregon brewery’s attorney, it was a cease and desist. The conflict concerned a name, a trademark—Hopasaurus Rex.

“I was incredulous,” Freetail founder Scott Metzger remembers. “How does a brewery’s lawyer even find out about something like this? It was like killing a gnat with a nuclear bomb. There should have been a different approach.”

Metzger fired off his own letter, a sassy one, very clearly acquiescing to the lawyer’s demands, but having a little fun in the process. Scott now admits that his response, complete with a drawing of a T. rex waiving a white flag, is not how he would handle the situation today. He understands that Freetail’s fans deserve more professionalism, that this whole industry warrants more professionalism.

Nevertheless, the situation garnered some national attention as one of the first legal, public conflicts about a beer name, and as it turns out, Freetail didn’t even brew a beer with that name. The Freetail version of Hopasaurus Rex was a corny keg they packed with hops. The keg was connected so that beer ran from a serving tank, through the hops, out through the taps—it was essentially a giant Randall.

“If anyone should have C&D’ed me, it should have been Sam [Calagione of Dogfish Head],” Metzger says. “We were clearly ripping off Dogfish Head’s Randall.”

It wasn’t the first time that Scott had been influenced by Calagione, either. “I’ve told this story to Sam, and thankfully he laughs at it,” Metzger says. “But I absolutely ripped off Sam’s whole basic business model. His book was like the bible for Freetail. Start with a brewpub, build a local reputation, then go into distribution.”

An avid homebrewer who started in 2003, Metzger recognized that Texas was an extremely under-served market for beer. His hometown of San Antonio, for instance, had two million people but only one brewery. “It was an absurdity, and I had to correct that problem,” he says. “I wanted to do my part and make it awesome.”

On a New Year’s Eve ski trip in 2005, Metzger made a New Year’s Resolution. He’d open a brewpub in San Antonio. “That was the only resolution I’ve ever kept,” he says.

Three years and a million dollars later, Metzger opened Freetail’s 15-barrel brewpub just north of San Antonio in 2008. “People kept telling me to double the budget for a brewery project and triple the time it would take to open,” Metzger warns. “I didn’t believe them. Turns out, those multipliers were exactly spot-on.”

Opening a brewery is an exhilarating time. It’s a blank slate, there are decisions to be made, and there are many ways to do it “right.” You really only get that blank-canvas opportunity once, though. Freetail would color its canvas with compelling beers that focused more on the wild side. “Your typical brewpub would have a stout, a pale, an amber, a wheat beer,” Metzger says. “We were going to have 15 beers on at all times, with only maybe three regular beers. We wanted to think outside of the historical European box of beer.”

A focus on the funky, the wild, the non-traditional side of brewing wasn’t necessarily the easiest sell to beer drinkers in the heart of Texas. “People kept asking us if we had any ‘domestic’ beer on tap.” Metzger remembers. “I would touch one of our serving tanks with one hand, then touch the bar with the other, and say, ‘This is about as domestic as you can get!’”

Freetail’s eventual slogan? “Domestic Beer, Undomesticated.”

La Rubia, a brewpub-only house blonde ale was a huge seller at first, unsurprisingly, but the brewpub quickly built a name with IPAs, Imperial Stouts, and lighter, tart and funky beers. It started a noticeable shift in the Texas market—a spate of “newer-school” breweries would open in Texas who would focus on these same styles, breweries like Jester King, Deep Ellum Brewing, and Austin Beer Works. Freetail only continued to build a reputation in San Antonio and Central Texas for leading this shift toward more interesting and quality beer. With the brewpub firing away, the next step in the business plan was distribution. But legally speaking, that was a major problem.

What Metzger wanted to do with Freetail, quite simply, wasn’t legal in Texas at the time. A brewpub couldn’t distribute its beer off-site in Texas, and there were major stakeholders entrenched in the state, well-funded wholesalers who weren’t interested in seeing that change. “I recognized this going in, and I had it written into the business plan,” Metzger says. “There was a line in the plan, big and bold, that read: ‘THIS IS ILLEGAL. We need to change the law.’ It was the dumbest thing I’ve ever written. If you write that into your business plan these days, you better re-write your damn plan. No investor should ever get behind a business plan that hinges on changing the law.”

From day one, Metzger started building relationships with local politicians at the capitol. “If some dude in Delaware could do it, I thought, it can’t be that hard,” he says of his patron saint, Calagione.

As it turns out, he was wrong. The Texas wholesaler lobby, like many wholesaler lobbies around the country, is extremely powerful—they shut down his efforts immediately. In 2009, Metzger tried to introduce legislative change but was denied. Introduced as HB 1062, the Texas Brewers Parity Amendment would’ve legalized the direct sale of beer from a brewery.

Back at it again in 2011, things were different. “We hired a lobbyist,” Metzger says. “We were more directed and organized in 2011, and we re-introduced [HB 660] to allow brewpubs to sell to distributors, and we were adamantly vocal about it.”

Hosting rallies for “beer freedom,” Metzger, Austin’s Uncle Billy’s Brew-N-Que and North by Northwest Brewery Restaurant, San Antonio’s Blue Star Brewing Co., and others were as loud as possible, posing the challenge: Why can’t Texas compete with other states, most states in the country, where this type of distribution was allowed? And they started to get some attention. “I got a letter from one of the biggest distributors in the country, Silver Eagle, saying that these guys wanted to meet with me,” Metzger says. “The message said come on Monday to a coffee shop, and come alone. I thought I was going to be killed.”

I got a letter from one of the biggest distributors in the country, Silver Eagle, saying that these guys wanted to meet with me. The message said come on Monday to a coffee shop, and come alone. I thought I was going to be killed.

— Scott Metzger

Against the odds and thankfully not murdered, Metzger found a partner with the wholesaler. “I’ll work with you, alongside you,” Silver Eagle president and CEO John Nau told him.

The support was finally there, and in 2013, another fight began. “The first six months were crazy, it was maddening to essentially be living in Austin at the capitol,” Metzger says. “It was difficult, I was bullied. I was called an amateur. I was mocked for wearing a suit. It was craziness.”

It all came down to the final day of the legislative session, with Metzger locked in a room with Texas wholesaler lobbyists and a state senator. If a compromise didn’t happen by 5 p.m. that day, no change would occur in 2013. Last-minute negotiations were made, language was adjusted, and a deal was made.

The 2013 legislation—a series of five senate bills, SB 515-518 and SB 639—that passed in Texas was nothing short of game-changing for The Lone Star State’s beer makers. Brewpubs were now permitted to distribute their beer to retail, and to sell off-site consumption beer to-go. Production breweries with distribution were now allowed to sell retail beer for on-site consumption at a tasting room as well. It changed the landscape for many breweries in Texas.

Jester King, for example, would see sales completely shift from selling literally no beer at its brewery to selling nearly 70% of its beer on-site. The Austin brewery also changed its license to a brewpub so it could sell beer to-go. That extra revenue was huge for them—they reinvested in their barrel program, hired, expanded.

“The work Freetail helped do in 2013 basically made our business viable,” Jester King founder Jeffrey Stuffings says. “We were essentially breaking even prior to the 2013 legislation. When it became legal to sell our beer at our brewery, our margins doubled overnight. We’ve been able to hire several more people and purchase land and equipment as a result.”

Freetail wasted little time, too. Metzger had impressively cleared the “THIS IS ILLEGAL” hurdle in his business plan. Immediately after the bill was passed, he purchased a new building in San Antonio and began building a production facility and tasting room. It’s a huge spot for them, and it’s built for expansion. In their first full year of production, Freetail did about 3,000 barrels at the new facility, in 2016 they’re projected to do 6,000, and they’ve got a future capacity of 40,000. It’s a slow-and-steady growth plan, building out their market presence in Central Texas—San Antonio, Houston, and Austin. It’s distribution built off of the local reputation of the beers earned at the brewpub. Sam Calagione would be proud.

But there was also a learning curve that came with the transition. The brewpub-to-distribution shift isn’t easy, at any level. “You’ve got production scheduling to worry about, managing inventory,” Metzger says. “Now we have obligations with wholesalers and retailers. As a brewpub, we just kept making beer, and it didn’t matter as long as the beer was good. Today we have commitments, we need to fill a lineup, keep the pipeline full, keep our retailers happy.”

This sweeping change has been happening all across the state in Texas. “Scott led the charge for all these changes,” Texas Craft Brewers Guild Executive Director Charles Vallhonrat says. “He was at the capitol every day during the 2013 legislative session, and for many months leading up to it, despite living an hour and a half away. He led negotiations for manufacturing breweries and brewpubs alike, taking a role within the Gulld to represent all of our members. He stood firm against the opposition of a large, old-fashioned distributor lobby that has been accustomed to getting its way at the Texas State Capitol for many years. Most importantly, Metzger earned Texas craft beer a voice in the Texas legislature and a seat at the table for all future beer-related legislation.”

And the wholesaler and distribution issues will be critical into the future, especially with news of AB offering incentives to wholesalers who elect to carry a certain percentage of AB brands.

“More than anything, the incentives show how late AB is to the game in trying to curb craft,” Metzger says. “[Instead, they] created the perfect opportunity for wholesalers to invest heavily in the craft segment where they can still make robust margins because no one player has enough influence to squeeze them. I’m not worried about any of my wholesalers, including Silver Eagle, taking the bait, because it would be a bad business decision for them. Craft is here to stay.”

During his time spent on the Brewers Association Board of Directors, Metzger acquired insights from the industry’s smartest, seeking advice on how to run a sales team, how to manage the competition for shelf space and tap handles, learning the language of distribution. People like Deschutes' Gary Fish, New Belgium's Kim Jordan, and Maine Beer Company's Dan Kleban showed him what it was like for them coming up, and he used that knowledge in building his own game-changing company. It’s been a dramatic ride for Freetail, and Metzger’s developed quite a bit over the years himself—both professionally and personally.

“I’m a lot less childish today,” Scott says, thinking back on that 2012 C&D before breaking into his mischievous grin. “Well, maybe.”